Tuesday, March 25, 2014

U.S. Supreme Court Ends Delaware Chancery Arbitration Program

This week, the U.S. Supreme Court denied cert in a case regarding a Delaware arbitration program where sitting judges heard corporate disputes in secret. The Court declined to review lower court decisions holding the program unconstitutional on First Amendment grounds because proceedings weren't open to the public. The confidential arbitration program was adopted in 2009 to further the state's business-friendly reputation. Companies often choose to incorporate in Delaware because of its favorable corporate legal climate. Businesses like arbitration because it can be faster and less expensive than court and takes place behind closed doors. The Delaware program was run through the state's Court of Chancery, where judges are known for their expertise in corporate disputes. Judges presided over the proceedings instead of private arbitrators, so long as a corporate litigants were willing to pay a $12,000 filing fee and $6,000 a day in arbitration costs. Business groups supporting the program reportedly said confidentiality was a time-honored and common sense aspect of arbitration that allowed companies to protect trade secrets and sensitive financial information. Critics said corporations shouldn't be able to pay for the services of a judge in secret. The Delaware Coalition for Open Government, a public-interest group, sued to challenge the program, saying that the public should have access to the arbitrations because they essentially were civil-court proceedings, conducted in a state courthouse with state resources. Last year, the U.S. Court of Appeals for the Third Circuit held allowing access to the proceedings would give stockholders and the public a better understanding of how the state resolves business disputes. Although the lower court rulings didn’t preclude Delaware judges from conducting public arbitrations, the decisions effectively put a halt to the program. See full reports here-- http://on.wsj.com/Qc5OpT and http://buswk.co/NPeNv6